Credit Simply Doesn't Matter in Real Estate Investing
I have read numerous posts about people wanting to improve their credit. With their number one concern being they believe this will solve their investing worries of being able to attain cash and credit to fund their deals.
You couldn't be further from the truth...
I personally have a low 500 credit score and it hasn't stopped me from investing. My credit has not been checked one time.
Take the name of this site for instance....The Creative Investor.... Doesn't that say it all!
Get Creative!
It's not a matter of will it work... It's a fact of how it will work... for me that is.
I have no other choice and refuse to let lack of cash or miserable credit get in my way!
Focus on the what needs to fill the void... credit and cash.... substitute it with the next best thing... paper....creative paper.
I recently purchased a 2600 sq ft, 4 bedroom, 2 bath home on 2 acres. $10 down to control the property, charged the newspaper ad (had them bill me), and had the property lease purchased in 22 days.....
Bought for $130,000 with a $125 a month rent credit on a 5 year lease purchase.
Sold on lease purchase for $167,900 giving $25 month rent credit... $2500 down and an additional $500 toward down the next 2 months from the buyer.
Received an excelent letter of recommendation from seller and is more than willing to accept calls from prospects for credibility.
The kicker to this one is he's a contractor with excellent referrences who is willing to do all repair work for me on future jobs and is an excellent licensed home builder wanting to work with me. He will even wait for the properties to sell to get his cut on the rehabs.
All this because he had to sell his personal home and after 9 months with a realtor who couldnt get the job done. All he wanted was relief from the mortgage.
I'm making some good money...excellent referrence... a contractor willing to bill me...seller got relief... and it cost me $10 to do it.
So, I ask you... does it take cash or credit to invest..... absolutely not.
Invest Creatively, DaveREI
Nice peace Dave. What you've sad is way to go when it comes to SFR. However, when it comes to land development that's a different ball game. I prefer to have the land owner take some stakes and equity in the further project and when it comes to construction loans, nothing bits the conventional bank loans. Call me conservative but I love ARMS 5X more then 15% /5points. Once I tried to take banks money subject to the existing financing (currently 1%) and guess what they told me? They told me: Get the license and open the bank yourself. Still considering....
Good article!
This serves to remind us that we can always accomplish our goals if we are determined enough, and are willing to dare and take action now.
Great answer, Dave!
Although I think you don't owe him an explanation on why you have a low FICO score! That is your business only. On the other hand it shows him that he has a trend of always *****uming the worst of a person; remember *****-u-me, it makes him one!
I think you did great and I admire people who work on getting ahead and don't get bogged down by a negative situation, and instead turn it around into a positive one.
Congratulations on your deals(s)!
Ladybug
Excellent Article, and EXCELLENT response to a VERY Negative comment based on PFA assumptions. (Plucked From the Air) Thank You VERY much for both
You speak with the wise words of a "prophet" and a sharp eye soothsayer.
These comments helped me in more ways than you can image.
William
Chicago
Thanks for the info. I share a similar situation. It's great to know there are solutions. Gosh, I love this website!
Although I agree it can be done with little or bad credit. I prefer my 740 credit score. It opens up so many avenues and possibilities. People with bad credit are truly at a disadvantage. Plus having a good credit score makes you look responsible and is a selling point if you want a owner to carry back a note.
nice piece, dave. congrats on ur success and thanks for widening my scope. my problem has always been thinking i deserve to attain a certain lifestyle. i know i can get there and i will, but sometimes when it's time to actually get rolling, i tend to say "i'll look at places for $50K" instead of trying to work the deals for $500K (maybe not quite this high).
so yeah, using creative investing to me always meant using it in a small means b/c with our similar credit scores, i wouldn't' expect to be able to do much more.
thanks for the light!
DaveREI,
What you have said is absolutely the way to go in this great "creative" industry.
So the person who has the high credit score can continue to purchase conventionally, while others with $10 bucks in their pocket know how to tie up hundred of thousands of dollars worth of properties and make money with them.
Continued success.
John $Cash$ Locke
DaveREI,
Love it!! But how do you "tie up" the property w/ $10 down?
Thanx,
JQ73
Thank you for your encouragement! I have a low score as well it is nice to know that it can be done. What were your means to locating this property as well as your others? What do you feel works best for you?
It seems to me that the prime skill in making money in RE is the ability to see through misinformation and to analyze data and reach conclusions that are different from what the the presenter has in mind.
Taking this article - for example - questions that come to mind are:
1. FICO - one has to work pretty hard to get a low 500 FICO score. Implies past lack of ability to do deals and thus puts current deal into question.
2. Skips over critical details - eg ties up property for $10 - and does not tell how.
3. Shill factor - does not use own name and thus for all we know is in fact one of the authors of the get rich books.
When you go out into the real world you will be bombarded by bogus pitches - you need to be able to recognize them. Corrolary - when you make a pitch you want to cover obvious bases to make it believable.
Lets take this article for example...answers to your questions!
1.FICO- It's really not all that hard to get a low 500 score-I personally absorb a debt , actually several to allow my father to continue medical treatments to keep him alive...thats where that can from in a nut shell.
1b. no lack of ability whatsoever....I have the ability-thats the point.....no current or future deals have or ever will be in question..credit is not the issue.
2. skips critical details...what would you like ...play by play....or the how to version.
3. real name : Dave Clark....Middleton Idaho.
added bonus: When your eyes are closed and your mind is idle you can only attack those that conquer the fear that they are a slave to.
added bonus #2: I am the real world and have all the facts , contracts , etc. to back this up... You simply can't handle the truth, let alone reality.
Great answer, Dave!
Although I think you don't owe him an explanation on why you have a low FICO score! That is your business only. On the other hand it shows him that he has a trend of always *****uming the worst of a person; remember *****-u-me, it makes him one!
I think you did great and I admire people who work on getting ahead and don't get bogged down by a negative situation, and instead turn it around into a positive one.
Congratulations on your deals(s)!
Ladybug
Excellent Article, and EXCELLENT response to a VERY Negative comment based on PFA assumptions. (Plucked From the Air) Thank You VERY much for both
You speak with the wise words of a "prophet" and a sharp eye soothsayer.
These comments helped me in more ways than you can image.
William
Chicago
Apparently dickknox is a very negative, criticizing, cold shower of a person. I wonder what you are doing on this site? The article is a very positive and uplifting one that will motivate a lot of people who visit this site and who thought that they could not get started in CREI because of lack of funds. This article encourages these people to get active and start doing their own deals.
Dickknox, because YOU don't have courage or creative abilities doesn't mean you can disparage other people for having courage and creative abilities. Perhaps you are from Mars and look green (with envy)?
Either get started and do something and let us know when you have success or quit undermining the harmony, enthusiasm and encouragement on TCI.
Ladybug
Good one, dickknox.
Dear DaveREI,
I would like to take you to task on that. Sure, it's easy to say that it doesn't take $$$ to invest in Real Estate, but when you're a "greenback" (like myself), it's all to easy to get frustrated and embarrassed by those who: a) think they know more than you and discourage you or,
b) don't want you to know how to be successful in the game in fear that you might be their competition.
Help a brother like me out! Teach me! Show me how you did what you've done in the past!
Show me how I can purchase a "2600 sq ft, 4 bedroom, 2 bath home" here in Folsom, CA without a "credit check".
Dave
Good post!
Although there are those who will find fault with you (for "accepting" your bad credit !! ), I do admire your being unwilling to let it stop your forward progress and persistence.
Heard a great REI and speaker * the other day say something truly profound -to my simple mind- and it's something you've discovered and all the rest of us should keep in mind:
"Don't let what you don't have, keep you from doing it...because whatever it is- cash, credit, fixer skills, etc...somedody else has that *****et or skill and will be agreeable to sharing it with you, for a piece of the pie"
*Greg Pinneo, a Seattle REI who's making it big in Seattle buying and holding A Grade rentals. He's just now beginning seminars, and you'll all know of him soon enough. When you get the chance, he's worth listening to, as somebody who's actually in the trenches, daily, and buying those props that can't be bought, etc.
I agree in part with what you say but wanted to add that you can improve your credit score and should
make that a goal. I agree that you do not need excellent credit or a large down payment to purchase property, I bought my home that way, however in as little as a year and a commitment to results you can raise your score substantially. (In almost every case) Keep doing what you are doing! It sounds like you have a great strategy and congratulations on your sucess.
My point is just that credit scores are dynamic and
there are steps you can take to really improve your
score, which helps when you need access to leverage capital. I have been on both ends of
the spectrum and I find the later to be less frustrating. In this day and age there is so much
information available on the subject of credit repair
that it is hard to justify not repairing your credit.
I will note that it is something that everyone can do
for themselves for free. A good place to start would
be the Creditinfocenter website, and getting to
know the FCRA and your rights as it pertains to your credit.
Wishing you continued Success!
bayhouse.com will tell you things about FICO scores that will curl your hair. Also refer you to an ebook about fighting back that is excellent. Loan terms aren't the only things affected by credit scores. Insurance rates are, too. And employment. And a whole host of other things which in my humble opinion have no business poking their nose into your credit score but which do anyway and prejudice you in the process so beware. Forewarned is forearmed! There's a whole long list of good and sufficient reasons for doing everything you can to beat those you-know-whats at their own game.
You really don't need much/any money to buy real estate. When you do creative financing deals, you don't need to worry about credit scores. No owner has ever asked to check my credit which is excellent. I show them a recent credit report because I have worked hard to have a great credit history and a great FICO. I imagine that it has solidified a lot of deals for me. It's my badge of honor.
What concerns me is, man pay your bills. Your score may be low because of past mistakes. If that's the case, then your scores should go up significantly. If it remains low, then the words deadbeat, welcher, and scammer come to mind.
Dave ,you are my hero! incredible.
Please disregard last comment. I misread your $10 for 10k. So the total $10 was used for marketing the property in the paper? Also, what was your total profit?
please forgive my ignorance. I've reread twice and answered my own question. It sounds like a great deal. I would be interested in finding out more about how the deal and other deals like it are going.
dickknox
Just use the common sense and you'll be fine:
To tie up the a home, house or a "deal" with $10.00 ( consideration money) you have to have some damn desperate seller. So look for them and then when you find one, come back for more instruction but do not criticize Dave for not spelling out the entire deal up front because this was not the point of the article. If you have questions, just ask and I am certain Dave will try to help.